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Will Germany invest in Thailand's 'land bridge' project?

Supposing that funding comes through and construction starts on time, the project will be finished by around 2040

Supposing that funding comes through and construction starts on time, the project will be finished by around 2040

Thai Prime Minister Srettha Thavisin, the country's self-styled chief "salesman,"has been shuttling between major capitals and in and out of meetings with ambassadors since he entered office in August to sell the idea of a vast "land bridge" connecting Thailand's eastern and western coasts.

The project is designed to provide a new trade route between the Indian and Pacific oceans, bypassing the Malacca Strait, one of the world's most vital and congested sea corridors.

It involves the construction of an about 90-kilometer-long (56-mile-long) rail and road system that will connect the deep-sea port in Chumphon Province on the Gulf of Thailand to a new, deep-water port in Ranong province on the Andaman Sea.

Srettha, who is also finance minister, touted the grand vision to Chinese investors when he attended the latest Belt and Road Forum in China in mid-October before pitching the €25.5 billion ($28 billion) megaproject to Middle Eastern investors a few weeks later.

He took the idea to San Francisco on November 12 when he attended the Asia-Pacific Economic Cooperation summit, where he spoke to American businesses during his "Thailand Land Bridge Roadshow."

The Thai government is open to anyone who wants to invest in what some analysts call a "pipe dream" that has been imagined by Thai leaders since as far back as the 17th century.

Lobbying for the project?

Ernst Wolfgang Reichel, the new German ambassador to Bangkok, apparently told Thai government officials earlier this month that he would lobby German businesses to invest in the project.

"The German side was clearly interested in the land bridge project. And [the ambassador] will report back to the German government about the project, which he believes will appeal to many investors," Thai Transport Minister Suriya Jungrungreangkit said this month, according to local media.

Ambassador Reichel reportedly also asked the Thai government to bring its Thailand Land Bridge Roadshow to Germany next year.

Whether German companies, such as Siemens, which has helped build parts of Bangkok's rail system, would be interested in investing in such a scheme waits to be seen.

Most analysts reckon the bulk of the funding will come from China, the largest investor in Southeast Asian infrastructure projects.

But the new Thai government, which took office in August after nearly a decade of military rule, has said it wants to diversify its investment links. Analysts say Bangkok wants to closely balance the country's economy between China and the West.

Supposing that funding comes through and construction starts on time, the project will be finished by around 2040, at which point both ports will have the capacity to handle approximately 20 million cargo containers annually, according to Thailand's Office of Transport and Traffic Policy and Planning, which manages the project.

From canal to land bridge

The idea dates back to the 17th century when the Ayutthaya kingdom was a prosperous entrepot and modernizers foresaw that a vast canal, dubbed the "Kra Canal," would connect the eastern and western coasts and boost trade.

The canal idea was resurrected on several occasions during the 19th and 20th centuries, although the scale and cost of the project was too great.

In the 21st century, Thai governments have leaned more towards a cheaper and more sustainable "land bridge” alternative, connecting the two coasts via railways and motorways, not a canal.

In 2020, Thailand's former military-run government resurrected the land bridge project and set up legislative and ministerial commissions to study its feasibility, which delivered their findings a few months ago.

The land bridge would be coupled with Thailand's vast Eastern Economic Corridor scheme, which aims to transform three nearby eastern provinces into hubs for manufacturing, research and services. It would also be connected to the new China-Laos-Thailand high-speed railway, as well as to railways China is building in neighboring Cambodia.

German participation likely 'limited'

According to the Office of Transport and Traffic Policy and Planning, ministers will report back to Cabinet on their discussions with international investors next year, and the bidding process will take place between April and June 2025.

As of 2020, 227 German companies had invested around €4.2 billion in Thailand, the largest German foreign investment in a Southeast Asian country other than Singapore and Malaysia, according to estimates by the Deutsche Bundesbank.

Mercedes-Benz and BMW, German automobile giants, have invested in manufacturing projects within the Eastern Economic Corridor scheme, while Siemens has invested in several transport infrastructure projects in the country.

According to a German diplomatic source, who asked not to be named as they were not permitted to speak about the matter, if German companies were to invest in the scheme, they would most likely focus on developing the ports.

But they added that any German participation would likely be "limited."

China's interest in the region

China, meanwhile, is the largest foreign investor in infrastructure projects in the region and it is building a pan-Asian railway network throughout mainland Southeast Asia as an alternative route to sea lanes passing through the Malacca Strait.

Thai-based Gulf Energy Development and the Chinese state-owned China Harbor Engineering Company are currently redeveloping Thailand's largest port at Laem Chabang.

Chinese firms would not benefit from a joint partnership with German companies and would only need a local Thai government partner, said Antonio Rappa, associate professor and head of Management and Security Studies at the Singapore University of Social Sciences.

Although German companies have invested in Thailand, their focus has been in IT and retail or manufacturing, not construction, he pointed out.

"So, it would not be wise for German companies to invest in that mega project even if they possess the technological know-how,” he added. "The Germans are likely to play a marginal role, if any.”

The German embassy in Bangkok did not respond to requests for comment.

Environmental and social implications

Mark Cogan, an expert on Thailand at Japan's Kansai Gaidai University, said another major stumbling block for European investors could be the environmental and social implications of the project, which haven't been fully assessed.

There have been several protests in the areas where the project will be located since Srettha said his government is committed to the scheme, as it could require the relocation of several thousand people. There are also concerns about the impact on the tourism and fishing industries in southern provinces.

"The immediate challenge for Srettha is to prove that the land bridge will not only be profitable, but it won't amplify carbon emissions in the process,” Cogan said.

There are also geopolitical risks. US officials have warned that Chinese engagement in the Southern Economic Corridor scheme could be a way for Beijing to gain control of Thailand's critical infrastructure, especially its ports.

All that said, Bangkok is clearly determined not to solely rely on Chinese money for this scheme, the analysts say, which could make it an ideal project for investment from the EU's Global Gateway Initiative, an infrastructure funder, or private European companies.

Meanwhile, the EU and Thailand agreed to relaunch talks for a free trade agreement in March. And the new Thai government appears keen to boost relations with European states. Discussions are also ongoing over whether to offer European visitors an extended visa-free stay of up to 90 days in Thailand.

Edited by: Srinivas Mazumdaru